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A steep decrease in Argentine bond yields and credit default swaps prices seems to indicate that the nation has avoided a technical default, analysts say. The change also reflects optimism that Argentina will resolve a court case with hedge funds that are seeking full payment after a previous default. A New York court has given the hedge funds three weeks to consider Argentina's proposal.

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The Argentine government aims to end more than a decade of conflict over defaulted bonds by paying four hedge funds $4.65 billion. The deal eliminates the last major obstacle to Argentina's return to the sovereign-debt market. The agreement calls for payment by April 14.

A delegation from Argentina and hedge funds holding some of its bonds met late into the night with court-appointed mediator Daniel Pollack in New York to head off a default. Axel Kicillof, Argentina's economy minister, said the talks will continue Wednesday.

Even if a U.S. court order blocks Argentina from making a bond payment at the end of this month, putting the government in technical default, the economy won't collapse and "life will go on," Cabinet Chief Jorge Capitanich says. Argentina's dwindling foreign reserves might have been resolved last week when the nation and China agreed to swap as much as $11 billion worth of their currencies over three years. Talks between bondholders and the Argentine government are scheduled to resume today.

Credit default swaps covering Argentina's debt continue to increase, after the government said payments on restructured bonds will be suspended if a U.S. court demands payment to holdouts. The CDS market reflects "an aggressive stance and a positioning where things are going to go against Argentina," said Ray Zucaro, a fund manager at SW Asset Management.

In U.S. court, attorney Jonathan Blackman said Argentina would rather stop payments to creditors who had agreed to restructure debt than agree to pay creditors who had held out. The news sent Argentina's bonds down and drove up credit default swaps covering the nation's debt.